"We have a tremendously clear business model," says Michael Dell. "There's no confusion about what the value proposition is, what the company offers, and why it's great for customers." Dell is now the number-one computer systems company.
Dell is extremely responsive. Buyers go on Dell's Web site and design their own computers. They give their payment authorization, which means that Dell receives the money in advance and can use the funds to pay for the supplies needed to build the computer. Because its computers are built-to-order, Dell carries an industry-leading four days of inventory. It takes delivery of components just minutes before they are needed. At its Austin, Texas, factories, a Dell System can in some cases be built, have the software installed, be tested, and be packed in eight hours. Dell's costs are lower, allowing it to price its computers lower than competitors' prices if it wishes.
Yet speed is only one part of the Dell equation. Service is the other. In fact, it was through veering away from its successful business model that Dell discovered the importance of customer service. In 1993, the company began trying to sell to retailers, mainly because everyone else was. Customers were disgruntled because of poor retail service. Dell ultimately abandoned the retail channel.
Most important, Michael Dell decided that "there would be more things we'd have to do besides build a PC." He knew his company had two kinds of customers, corporate and consumer. Whereas the consumer would buy mainly because of price, the corporate buyer needed a carefully developed relationship. Like most successful companies, Dell put the most resources into building relationships with its most profitable customers.
Corporate customers make up about 80 percent of Dell's business, and the company manages its corporate accounts with a top-notch sales team. Dell also installs custom software and keeps track of business customers' inventory for them. Through the use...